Although not as much as during Black Monday in 1987, the stock market has suffered. “If you look from January 20 – Inauguration Day – until today, the stock market is down almost 16%. That’s quite different from Trump’s first term and Biden’s term.” “The stock market is usually an indicator of future conditions…and when the stock market is responding as it is, it seems it is largely due to the tariffs and the uncertainty surrounding the tariffs and what’s going to happen both to the tariffs and other issues involving the Administration.”
Oil prices are also falling. “Oil prices are down from around $70/barrel to just over $60/barrel. They are down for two reasons: one, the Saudis (OPEC) announced that they would produce more oil, so that’s an increase in supply, and on the other side of the supply and demand picture, we expect the demand to fall because of the tariffs…if recessions occur, it lowers the demand for oil – that’s a pretty standard result.”
“I think this decline in the stock market is sort of an indicator of a possible recession, of course the stock market has declined before and we haven’t had recessions, but it is correlated. The other thing is the tariffs themselves – these are huge taxes and we are imposing them on a wide variety of goods…they are an increase in taxes, an increase in price, they are going to reduce the purchasing power of household income, they are going to reduce spending in real terms on these goods, so there’s a real chance of a recession. Both Goldman Sacks and JP Morgan came out [with announcements] today and one said that if the tariffs are all enacted, the change of a recession is over 50% and the other said 60%. These are pretty high probabilities of a recession.”